Abstract
Services and goods in the new economy, such as social media platforms and applications, are often offered to end-consumers for “free”. This may cause problems for the application of traditional antitrust doctrines, such as tying or other forms of leveraging, which normally have been applied to products and services offered at a price. As illustrated by the Microsoft I decision (Windows Media Player), it is not self-evident that the bundling of an application with an operating system results in coercion, the pressure to consume the “tied” product, if consumers have a de facto possibility to download competing products for free. Moreover, the availability of competing products for free may also affect the long-term effects in the market, as both the existing customer base and new customers may easily shift their consumption, which decreases potential “lock-in” effects. This propensity and capability of customers to choose products or services other than the predefined “default” option, e.g. by being included in a bundle, was also relevant in the recent Google decision (Shopping), which concerned the company’s preferential placement of its own advertising messages in internet searches. In both Microsoft I and the Google decision, it was found that consumers were unable to choose products and services other than the default option, so-called consumer inertia. Consumer inertia has been explained both by the traditional law and economics literature and behavioural economics with switching costs, information costs and the status quo bias. Accordingly, this article explores the concept of consumer inertia in the light of the law and economics literature, in particular behavioural economics, to determine the factors which are relevant for establishing the presence of consumer inertia in individual antitrust cases concerning the new economy. Moreover, the article evaluates to what extent the use of consumer inertia in cases from the Union courts and the Commission is consistent with economic theory.
Highlights
The behaviour of consumers is crucial for the economic models that antitrust relies on
This article explores the concept of consumer inertia in the light of the law and economics literature, in particular behavioural economics, to determine the factors which are relevant for establishing the presence of consumer inertia in individual antitrust cases concerning the new economy
Consumer inertia must be seen as a concept that is firmly established within EU Competition Law
Summary
The behaviour of consumers is crucial for the economic models that antitrust relies on. If the coercive measure is directed towards an intermediary, like a reseller, availability of substitutes free of charge for end-consumers may still open up the market for rivals to the dominant supplier It is in this context that consumer inertia may be a relevant factor which results in a coercive effect or in the elimination of competition. Rivals to the dominant supplier will need access to the necessary “infrastructure” or platform on one side of the market to effectively compete on the other side of it In this context, consumer inertia results in a disadvantage if consumers tend to choose products that are directly accessible through the particular infrastructure or platform, even if there are other potential distribution channels. The presence of consumer inertia may be relevant for showing the indispensability of access to the infrastructure, as well as for demonstrating that alternative distribution channels are not effective, which results in the elimination of competition in the neighbouring market
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